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It’s a familiar dance for Obama. In 2010, the ascendant GOP refused to allow Obama to extend the tax cuts for individuals making less than $200,000 and married couples earning less than $250,000 unless he also continued the breaks for the top brackets.

The result: With his back up against the wall, Obama extended the breaks for everyone through Dec. 31, 2012. The administration insists he won’t fall for the same trap again.

“He will not support extension of the upper-income Bush tax cuts,” White House spokesman Jay Carney said in June. “He couldn’t be more clear.”

The Democratic controlled Senate has already passed a bill that would extend the cuts for only the middle class while the Republican dominated House passed a measure to extend all the tax cuts.

Partisan hijinks aside, the fate of the Bush tax cuts will have a real impact on any tax overhaul debate that sprouts up next year. If the tax cuts are allowed to expire for everyone, as the Congressional Budget Office’s baseline assumes, lawmakers will suddenly be working with $800 billion in new revenue just between 2012 and 2014.

According to the CBO, they also will likely be fighting a new recession due to the impact of the tax increases and the corresponding spending cuts that would take place under the so-called “fiscal cliff.”

3. Would Obama raise taxes on the middle class?

Obama, like Romney, says individuals making less than $200,000 and couples making less than $250,000 have nothing to worry about from his tax plan.

But this issue has daunted the Romney campaign in recent weeks after a Tax Policy Center study found that the GOP candidate couldn’t achieve all of his tax goals without turning to the middle class for some revenue.

The math isn’t much easier for Obama.

The type of tax provisions that the administration and congressional Democrats often propose don’t raise a ton of money. For instance, the Buffet Rule that Obama touted earlier in the year — which would require the rich to pay a tax rate of at least 30 percent — only raises $47 billion over 10 years.

That underscores the fact that while going after the rich could be good politics, there likely is not enough revenue to collect from the top brackets to pay for a fundamental tax code overhaul.

If Obama were to win his re-election bid and try to reshape the code, it’s hard not to turn to the middle-class to at least some degree, said Ed Kleinbard, a Democrat and former director of the congressional Joint Committee on Taxation.

“It’s a matter of shared sacrifice,” said Kelinbard, who is now a professor at the University of Southern California School of Law. “It’s appropriate to say everybody is going to pay a little more. We’re going to have a sensible, stable system. We can declare victory and go home.”

Kleinbard said Obama will have to revise the way itemized deductions — like the one for home mortgage interest works — because “that’s where the money is.”

The government could generate $1.3 trillion over a decade by repealing a limit on deductions for the very wealthy and instituting a 15 percent limit on the value of personal deductions for everyone, according to a paper Kleinbard published with TPC’s Joseph Rosenberg in June.

So far, Obama has only proposed capping itemized deductions for top earners.

Taxes are going up regardless of who gets elected. Given that we are 14 Trillion + dollars in debt and that SS/Medicare/interest on the debt/military spending are not simply going away, the government will need to raise revenue to pay its bills.

We are not returning to the 19th century version of small government. Most Americans and almost half of private industry rely on government expenditures including but certainly not limited to entitlements.

We can no longer sustain almost half of Americans not paying income tax, capital gains at 15%, and only 10% of revenue from business.

Look for a tax policy that matches current and realistic government expendures (minimum of 22%). Anything less will only extend the deficit.

Some day we may "run out of other people' money" but we are a long way off. That tipping point is reached when marginal tax rates are much higher (50%+). Americans will not walk away from SS, Medicare, or Pell grants just to keep taxes low.

THere is no tax changes from the Obama admin, only from Republicans. And, the President's door has NEVER been open for anyone from the congress, in particular the REpublicans. He just throws around the "I Won" stuff and says "don't call me , I;ll call you!" He just doesn't know how to work with anyone. Only people that he can tell what to do and have them do it. He is not a leader in any way.

a 9% deficit is unsustainable, even if the politicians lack the courage to fix the problem the bond market will eventually do it for us and when that happens life as we know it is going to change dramatically.

educated patriot: "Taxes are going up regardless of who gets elected. Given that we are 14 Trillion + dollars in debt and that SS/Medicare/interest on the debt/military spending are not simply going away, the government will need to raise revenue to pay its bills."

Did you not even bother to read the article? Did you just trot out the Marxist Democrat talking point lies so you wouldn't have to think?

Raising every tax and eliminating every loophole will only cover about 33% of our annual deficit and that is based solely on static scoring. In actuality it will be far less because of the deep recession it will put the country in.

"We are not returning to the 19th century version of small government. Most Americans and almost half of private industry rely on government expenditures including but certainly not limited to entitlements."

In for a dime, in for a dollar! If we are going to cause another recession then take advantage of it. Just totally eliminate all of this. It will only be in our favor in the long run as the entire business sector is forced to actually become competitive instead of depending on the taxpayer for subsidies.

It's a rotten, cheating game the Marxist Democrats (AND SOME REPUBLICANS) play by pretending they can help the people and business by extracting money FROM THE PRIVATE SECTOR. It's a lose-lose proposition because government can *NEVER* put as much back in as they take out. Part of what they take in just gets lost in the friction the government causes internally.

"We can no longer sustain almost half of Americans not paying income tax, capital gains at 15%, and only 10% of revenue from business."

You are partly right and partly wrong.

Yes, we can no longer sustain half of the country paying nothing in income taxes and many of them actually receiving tax rebates for no income.

We can *certainly* lower capital gains taxes and dividend taxes. According to my financial planner (at a major firm) almost 90% of dividends and capital gains get reinvested. I know I have tried to educate you on the Production Possibilities Fronteir in other threads but *increasing* capital investment *DOES* increase employment, lower prices, and increase consumer spending -- WHICH, IN TURN, SPURS *MORE* CAPITAL INVESTMENT.

Taking money *OUT* of the capital investment loop in taxes CONTRACTS the PPF causing lower employment, higher prices, and lowered consumer spending which, in turn, spurs *less* capital investment. It is *so* obvious that this is the spiral we are currently caught in that it is unbelievable. It is why NO AMOUNT OF SPENDING STIMULUS will fix the problem. It actually causes an even *worse* contraction of the PPF as money is taken out of the private sector that could be used for capital investment.

It is totally counter-intuitive to Marxist Democrats but raising the amount of taxes business pay just makes the businesses less competitive in both overseas sales and in domestic sales competing with imports. This causes one unintended consequence that the Marxist Democrats will never admit to -- it forces smaller business to either go out of business or to merge with bigger competitors with higher productivity. What you wind up with are markets with limited competition between a few LARGE competitors (who can exert significant political leverage) -- which is exactly what we have today.

It's why Marxism *NEVER* works. It is based on economic theory that is totally and utterly flawed.

"Some day we may "run out of other people' money" but we are a long way off. That tipping point is reached when marginal tax rates are much higher (50%+). Americans will not walk away from SS, Medicare, or Pell grants just to keep taxes low."

Do you understand what you have just said here?

Most small businesses are already over 50% in taxation when you count federal, state, and local taxes and fees. WAY OVER 50%.

We've already reached the tipping point -- what on earth do you think the TEA party is all about?

A shared sacrifice means just that - you cannot expect a sliver of society to bear the brunt of the excessive, out-of-control spending and remain steadfast in your resolve to only raise their taxes. Obama says that we are all in this together - well, let's all be in this together. How about doing a flat tax for all? Eliminate a lot of other taxes and just charge us a basis "whatever" - be it 10, 15 or 20% and be done with it.

BOTH sides of the political aisle are to blame - it is high time that we as the voters of this country elect those people who truly want to go and make a difference and are not afraid to make tough choices/decisions (for all - not just some - the only people who should be excluded are the TRULY NEEDY AND DOWNTRODDEN people of this country).

The sustainability of the course we are on CANNOT continue - everyone cannot feel entitled - entitlements are what is crippling this country financially.

Further, it is so sad that our industrial base is gone - sending everything overseas. You can argue all you want with me on this particular point but the fact of the matter is that it is cheaper to produce anywhere else but here - and a big chunk of that rests on the shoulders of America's unions. People overseas aren't as greedy and don't demand which is why a product can be more cheaply produced (they also don't feel entitled, just thankful to even have a job).

We are not returning to the 19th century version of small government. Most Americans and almost half of private industry rely on government expenditures including but certainly not limited to entitlements.

Thoughtful post EP,

I have to disagree with your 19th century version of small government. I would put prior to 1965 as the demarcation. That was of course the begining of the entitlement governance.

In 2008 when John McCain vetted Mitt Romney for the VP job, Romney gave McCain the past 23 years of Mitt's IRS Tax returns! And McCain chose Palin over Romney!

So McCain could see Romney's tax returns, but the American people are NOT allowed to see them now! THAT WON’T PLAY IN PEORIA!

Over 20 prominent Republican including George Will and Bill Crystal now say "release the tax returns" WHAT’S MITT ROMNEY HIDING? It must be some pretty bad stuff!

There are two important and reasonable unanswered questions: In any of the last 10 years did Romney pay NO income tax on all his income? And REALLY DEADLY did Romney, the man with no moral compass, have to take the 2009 IRS-offered Swiss Bank Account Amnesty?

In 2008 when John McCain vetted Mitt Romney for the VP job, Romney gave McCain the past 23 years of Mitt's IRS Tax returns! And McCain chose Palin over Romney!

So McCain could see Romney's tax returns, but the American people are NOT allowed to see them now! THAT WON’T PLAY IN PEORIA!

Over 20 prominent Republican including George Will and Bill Crystal now say "release the tax returns" WHAT’S MITT ROMNEY HIDING? It must be some pretty bad stuff!

There are two important and reasonable unanswered questions: In any of the last 10 years did Romney pay NO income tax on all his income? And REALLY DEADLY did Romney, the man with no moral compass, have to take the 2009 IRS-offered Swiss Bank Account Amnesty?

Raising every tax and eliminating every loophole will only cover about 33% of our annual deficit and that is based solely on static scoring. In actuality it will be far less because of the deep recession it will put the country in.

"We are not returning to the 19th century version of small government. Most Americans and almost half of private industry rely on government expenditures including but certainly not limited to entitlements."

In for a dime, in for a dollar! If we are going to cause another recession then take advantage of it. Just totally eliminate all of this. It will only be in our favor in the long run as the entire business sector is forced to actually become competitive instead of depending on the taxpayer for subsidies.

Your right. Raising taxes will cause a recession. We can wait until the economy fully recovers and ramp up the tax rate accordingly (in real dollars not marginal rates). Or we can take your view and utilize the recession to revamp government. I'll take Uncle Sam at 25% of the US economy. Given my experience with the private sector over the past few years I have seen fraud (Enron, CDOs, poor ratings from Moody's), market speculation (dot.com), and loss of well paying jobs (middle class income stagnation and the end of private sector pensions). So forgive me if I don't see the free market as the solution to all of life's problems. It is simply a tool to generate wealth, which local/state/federal government collects taxes from to provide societies required services.

Collecting 3.5 trillion dollars in a 15 Trillion dollar economy is not impossible. Most industrialized nations tax more than we do in terms of actual revenues.

I prefer a free market tempered by government involvement to ensure the majority of Americans interests are protected. Government is the only one that does that. Unions and private sector defined benefits are almost dead. I chose the outcomes of the median over the opportunity of the few.

Most of my generation (X) has lost jobs from the recessions of 2001 and 2008, have 401Ks that will never support them in retirement, and have spotty insurance coverage. That's why I served in the military for 20 years. I have security (pension, and lifetime insurance coverage) while my private sector peers know nothing but instability and will ultimately rely heavily on SS and Medicare. My parents had similiar protections (from General Electric) but those days are over. The private sector is no longer providing for the middle class. I assure you every dollar taken out of the private sector to put into my pension is a dollar well spent. Every bit as good as Mitt Romney's capital gains and I pay a higher marginal rate of taxes.

I can also tell you that one does not become "more efficient" by moving from the government to the private sector. I once was concerned about the health of America's troops and their families. Now I am concerned about collecting as much reimbursement as possible from Medicare/Medicaid and the dwindling private sector insurance coverage regardless of the health status of my patients. Its a shell game of increasing revenue, not improving service. If it wasn't for CMS demands for tracking quality metrics (such as HEDIS) as a requirement in reimbursement, there would be no focus on improving outcomes.

Both sides are disingenuous about taxes. Obama avoids saying that middle class taxes will also have to go up after the recession is over; Romney and Ryan pretend to believe that zeroing out taxes on investment wealth and further tax cuts for the rich wouldn't make the deficit much worse.

But it appears that American voters reward dishonesty and punish truth-telling, so what else can we expect?

So forgive me if I don't see the free market as the solution to all of life's problems. It is simply a tool to generate wealth, which local/state/federal government collects taxes from to provide societies required services.

EP,

I mean no disrespect, but in essence your life's view point is one of a bureaucrat. You have in essence, putting your talents and career into the certainty of a Government job.

You of course lament, the lack of certainty that the private sector offers and that the private sector needs to be "controlled" by the benevolent hand of government. Of course without a meaningful dialogue, I can't presume your thinking, but I gleen that private sector is "less efficient" than our government services and that a private sector businesses function is to generate revenue for the government, so that revenue can be taxed to provide services the government provides.

I wonder how much functionality the Government can provide, with a deminished private sector?

When does an entrepreneur say, "this juice isn't worth the squeeze" when confronted with tax and regulatory burdens?

Do Progressives want to celebrate and support the "middle class" or workers, while making it increasingly more difficult for the guy/gal who put(s) their rumps on the line for an enterprise?

There is much you posted that is so alien to me, I honestly wouldn't know where to begin. I say this, without being polemic, your postings are informed and thoughtful, which makes them enjoyable to read.

I would say, I just have very fundemental difference with your world view.

We can *certainly* lower capital gains taxes and dividend taxes. According to my financial planner (at a major firm) almost 90% of dividends and capital gains get reinvested. I know I have tried to educate you on the Production Possibilities Fronteir in other threads but *increasing* capital investment *DOES* increase employment, lower prices, and increase consumer spending -- WHICH, IN TURN, SPURS *MORE* CAPITAL INVESTMENT.

Taking money *OUT* of the capital investment loop in taxes CONTRACTS the PPF causing lower employment, higher prices, and lowered consumer spending which, in turn, spurs *less* capital investment. It is *so* obvious that this is the spiral we are currently caught in that it is unbelievable. It is why NO AMOUNT OF SPENDING STIMULUS will fix the problem. It actually causes an even *worse* contraction of the PPF as money is taken out of the private sector that could be used for capital investment.

So let's keep this simple.......Example: An investment/venture capitalist company steps in a buys controlling interest in a company......does it "management" thingy and restructures laying off and streamlining.......borrows on the company's assets and pays themselves millions........busines eventurally fails because of th debt burden and the same investors/venture capitalist close down the business, invests in overseas ventures, stores their "gains" in offshore accounts, enjoy a 15% tax rate, and does it all over again with another company..........not increasing employment (not in the US that is) but in fact adding these people to the unemployment lines, stagnating consumer spending because people have no money to buy things, not enough income to pay their mortgages, and increase their personal debt ratio by using credit cards they cannot pay for........

Upper incomers have enjoyed tax breaks for the past 8 years and have not "reinvested" enough to make a difference in our economy.....that's the record......why all of a sudden are we to believe that things will be different now?

EP, I am skeptical this will transpire if the President is re-elected. I am unaware of any prior concern for extending the deficit by this President.

Do you imagine he will begin?

When we are safely on the road to recovery and he doesn't need to worry about being relected (its hard to run on tax increases).

Deficit spending is the proper role of government during a recession/depression. You put money in the economy when the private sector receeds and pay off the debt with higher revenue when the economy recovers. That is why Obama ran up the deficit. The alternative would make the recession worse.

There is much you posted that is so alien to me, I honestly wouldn't know where to begin. I say this, without being polemic, your postings are informed and thoughtful, which makes them enjoyable to read.

I would say, I just have very fundemental difference with your world view.

My views are based on my life experience.

I received survivorship benefits from SS as a child. ROTC for college, followed by 20 years of military pay and benefits and more government funded college. Went to work in healthcare, where more than 50% of revenue comes from public money, even for the big for profit companies (HCA, Humana, etc.). So government expenditure is my lifeblood.

During my lifetime I have seen people make huge fortunes based on short term gain (and at times outright fraud) in the private sector. Investing has become more market speculation than company building. Corporations have moved offshore to banana republics to avoid taxes disconnecting themselves of public responsibility. Stocks and real estate investment implode. So that is why I have a more reserved view of the private sector. Wealth is no longer connnected to productivity. Wall Street is disconnected from Main Street and has annexed itself to the Vegas Strip.

But yes, I could be described more of a bureaucrat than an entrepreneur. I run healthcare I don't invent it. I'm the guy entrepreneurs call to run the companies they create.

I don't suggest government is more efficient than the private sector. They are both equal in that regard. The drive for profit does not necessarily result in efficiency. That is more of an ideal of truly competitive markets, not the reality. Nor is all government benevolent.

If GOTP refuses to budge on providing tax cuts to 98% while letting temporary tax gift for 2% expire, Obama should let entire Bush-era tax scheme expire and return to Clinton tax plan. Then pick up where Simpson-Bowles left off to enact a progressive tax rate schedule that taxes "unearned income" the same as "earned income." This was the Reagan 1986 plan, but the top tier 28% was too low. Congress should consider Reagan 1986 tax plan and add two more tiers at the top - 35% for income > $500,000 and 42% for income > $1,500,000. In addition, remove the SS wage ceiling and apply FICA tax (SS + Medicare) to ALL income. The Myth of the Lower Marginal Tax Rates Conservatives’ Go-To Growth Solution Doesn’t Hold Up

SOURCE: AP/J. Scott Applewhite (link to complete article at bottom)

By Michael Linden | June 20, 2011

"The top marginal income tax rate has ranged all the way from 92 percent down to 28 percent over the last 60 years. With such a large range, it should be easy to see the enormous impact of lower rates on overall economic growth...

That’s definitely not what happened. In fact, growth was actually fastest in years with relatively high top marginal tax rates. Back in the 1950s, when the top marginal tax rate was more than 90 percent, real annual growth averaged more than 4 percent. During the last eight years, when the top marginal rate was just 35 percent, real growth was less than half that.

These numbers do not mean that higher rates necessarily lead to higher growth. But the central tenet of modern conservative economics is that a lower top marginal tax rate will result in more growth, and these numbers do show conclusively that history has not been kind to that theory." [emphasis added]

During my lifetime I have seen people make huge fortunes based on short term gain (and at times outright fraud) in the private sector. Investing has become more market speculation than company building. Corporations have moved offshore to banana republics to avoid taxes disconnecting themselves of public responsibility. Stocks and real estate investment implode. So that is why I have a more reserved view of the private sector. Wealth is no longer connnected to productivity. Wall Street is disconnected from Main Street and has annexed itself to the Vegas Strip.

But yes, I could be described more of a bureaucrat than an entrepreneur. I run healthcare I don't invent it. I'm the guy entrepreneurs call to run the companies they create.

I don't suggest government is more efficient than the private sector. They are both equal in that regard. The drive for profit does not necessarily result in efficiency. That is more of an ideal of truly competitive markets, not the reality. Nor is all government benevolent.